Seyfarth Synopsis: June 7, 2018, when the city’s new Paid Sick Leave rules take effect, marks the latest chapter in the City by the Bay’s long history of imposing local employment standards that exceed state requirements. Here’s what you need to know before this latest San Francisco peculiarity begins.

On May 7, 2018, after considering public input on proposed rules to the City’s Paid Sick Leave Ordinance (PSLO), the San Francisco Office of Labor Standards Enforcement (OLSE) published new rules interpreting the PSLO, which is the granddaddy of municipal paid sick leave (PSL) mandates. The OLSE enacted its original interpretative PSL rules in May 2007. More recently, on January 1, 2017, the OLSE amended the PSLO. Now, nearly 18 months later, updated rules will take effect on June 7, 2018. Highlights of some key aspects follow.

Joint Employers

The PSLO broadly defines “Employer” as “any person…who directly or indirectly…employs or exercises control over the wages, hours, or working conditions of an employee.”

The new rules state that if an employee is jointly employed, and at least one employer is covered by the PSLO, each employer must comply with the PSLO. The rules follow California law to determine if an employee is jointly employed. The OLSE notes, by way of example, that joint employment can occur when an employer uses a temporary staffing agency, leasing agency, or professional employer organization. The new rules further state that a “controlled group of corporations” (as defined by the IRS Code), is considered to be a single employer under the PSLO. Employees of unincorporated businesses also are counted as working for one employer if the business satisfies the IRS’s “controlled group of corporations” definition.

Documentation

Under the PSLO, an employer may only take reasonable measures to verify or document an employee’s use of PSL. As stated in the OLSE’s original PSL rules, employers generally can require employees to provide reasonable documentation justifying their use of PSL for absences of more than three consecutive full or partial workdays. The new rules further explain that employer policies requiring a doctor’s note or other documentation when employees use PSL (a) to attend a medical appointment, or (b) in situations of a pattern or clear instance of abuse will be presumptively reasonable even if the use of PSL was for three consecutive workdays or less.

Rate of Pay

The new rules also provide guidance on calculating employees’ rate of pay for used sick leave and generally track the California statewide standards. Like the CA law, San Francisco’s new PSL rules require different rate of pay calculations for exempt and non-exempt employees. Although the PSLO does not define “regular rate of pay” or “exempt employee,” the new rules defer to the California Division of Labor Standards Enforcement for calculating an employee’s regular rate of pay, and state that an employee’s exempt or non-exempt status is based on whether the employee is exempt from overtime pay under the FLSA and California law. If an individual is exempt, and no other forms of paid leave are provided, the employee must be paid his or her salary without any deduction for sick time taken. However, the time taken can be applied against the employee’s sick leave balance.

Rehired Employees and Breaks in Service

Under the PSLO, employees are entitled to use accrued PSL beginning on the 90th day of employment. For rehired employees, if an employee separates from the employer and is rehired by the same employer within one year, all previously accrued, unused PSL must be reinstated.

In instances where an employee separates from an employer before the 90th day of employment and is rehired within one year, the new rules clarify that the original period of employment is counted toward satisfying the 90-day usage waiting period. For example, if an employee separates from an employer after working for 45 days, and then one month later is rehired, the employee must work another 45 days before the employer needs to permit the employee to use his or her accrued PSL.

Unionized Workforces

The new rules make clear that many PSL practices or policies that have been deemed reasonable in a bona fide collective bargaining agreement (“CBA”) remain so, even if the CBA does not explicitly waive or reference the corresponding PSLO section. This can include practices or policies about notification, verification, increments of time in which paid sick leave must be taken, and sick leave pay rate.

The Upshot

In its introduction to the new rules, the OLSE stated that it was guided by the need to provide clear direction to employers and employees about the PSLO. While these new rules clarify certain gray areas under the PSLO, it remains to be seen whether they will result in further clarification or modifications to the OLSE’s interpretation of the Ordinance.

To stay up-to-date on San Francisco, California, and general Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list.

Seyfarth Synopsis: California is rife with regulation of how employers may obtain and consider background check information for use in hiring and personnel decisions. The relatively new California ban-the-box law (effective January 1, 2018) and the older Los Angeles and San Francisco ordinances and amendments to the California Labor Code set strict rules on when and how employers can consider criminal and credit histories in employment. Many details to follow.

Before 2014, when San Francisco enacted a city-wide ban-the-box law, criminal history background checks were largely unregulated in California, except for a handful of Labor Code provisions that barred consideration of certain types of criminal records. And California employers were stripped of their ability to use credit checks for hiring and other personnel decisions in 2012, by amendments to the Labor Code that restricted the use of credit checks to very narrow circumstances. Los Angeles and the State of California have now joined San Francisco with their own ban-the-box laws, which markedly differ from San Francisco’s.

This blog highlights the laws concerning criminal and credit history background check reports in California, after briefly discussing the decades-old federal Fair Credit Reporting Act (“FCRA”). As the number of class actions alleging FCRA violations continues to skyrocket, it is critical that California employers understand the basics of all laws affecting employment screening programs and determine what changes to policies, forms, and practices will ensure compliance and reduce the risk of claims.

FCRA Basics

Generally speaking, before an employer may obtain a consumer report (aka a “background check report”)—which may include criminal or credit history, from a third-party background check company (“consumer reporting agency” or “CRA”)—the employer must make a clear and conspicuous written disclosure to the individual, in a document that consists “solely” of the disclosure, that a background check may be done. California’s fair credit reporting statute also requires a separate, stand-alone disclosure, which cannot be combined with the FCRA disclosure. The applicant or employee must provide written consent for the employer to obtain a background check report. There are other requirements for “investigative consumer reports” (those based on interviews of the individual’s friends, neighbors and associates) and employers regulated by the Department of Transportation.

Before an employer relies in whole or in part on a background check report to take an “adverse action” (e.g., rescinding a conditional job offer or discharging an employee), the employer must provide the individual a “pre-adverse action” notice, and include with it a copy of the report and the Consumer Financial Protection Bureau’s Summary of Rights. This notice gives the individual an opportunity to discuss the report with the employer before the employer takes adverse action.

Once the employer is prepared to take the adverse action, it must then give the individual an “adverse action” notice, containing certain FCRA-mandated text.

California employers that rely on criminal and credit history information for employment purposes must also consider state and local laws that impose additional compliance obligations, regardless of whether the information is obtained from a CRA.

Employers May Order “Credit Reports” Only for Certain Positions

As noted, California employers have been hampered in their ability to order credit checks since 2012. Labor Code section 1024.5 states that employers, except for financial institutions, may order a credit check only if the individual works (or is applying to work) in certain positions:

a managerial position (as defined in California Wage Order 4);

a position in the State Department of Justice;

a sworn peace officer or law enforcement position;

a position for which the employer must, by law, consider credit history information;

a position that affords regular access to bank or credit card account information, Social Security numbers, and dates of birth (all three are required), so long as access to this information does not merely involve routine solicitation and processing of credit card applications in a retail establishment;

a position where the individual is or will be a named signatory on the bank or credit card account of the employer or authorized to transfer money or authorized to enter into financial contracts on the employer’s behalf;

a position that affords access to confidential or proprietary information; or

a position that affords regular access during the workday to the employer’s, a customer’s or a client’s cash totaling at least $10,000.

Setting aside state and federal disclosure and authorization requirements discussed above, any California employer that intends to order a credit check on a position identified above must notify the individual in writing why the employer is using a credit report (e.g., the individual is applying for or holds a position that affords access to confidential or proprietary information).

California’s State and Local Ban-the-Box Laws Restrict Use of “Criminal History”

California’s statewide ban-the-box law (Gov’t Code § 12952), as of January 1, 2018, requires employers with five or more employees (subject to few exceptions) to follow certain procedures when requesting and using criminal history information for pre-hire purposes. Specifically, regardless of the source of the criminal history information, employers must:

Wait until after a conditional offer of employment to inquire about criminal history, which means asking applicants directly whether they have been convicted of a crime, ordering a criminal history background check, or making any other inquiry about an applicant’s criminal history.

Conduct an individualized assessment of an applicant’s conviction to determine whether it has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.” Unlike the Los Angeles ban-the-box ordinance (discussed below), the California law does not require employers to provide the applicant with their assessment.

Notify the applicant of any potential adverse action based on the conviction history. The notice must identify the conviction, include a copy of any conviction history report (regardless of the source), and state the deadline for the applicant to provide additional information, such as evidence of inaccuracy, rehabilitation, or other mitigating circumstances.

After waiting the requisite time period, notify the applicant of any final adverse action, of any existing procedure the applicant has to challenge the decision or request reconsideration, and of the applicant’s right to file a complaint with the Department of Fair Employment and Housing.

In contrast to the FCRA pre-adverse and adverse action notices—required only if the adverse decision is based on information obtained from a background check report from a CRA—the California notices are required even if the employer doesn’t order criminal background check reports from a CRA, but learns of the criminal history from a different source (such as an applicant self-disclosure).

Substantively, a wide range of criminal records are off-limits to California employers (unless the employer qualifies for very narrow exceptions identified in the Labor Code). Records that cannot be used are:

arrests that did not lead to a conviction;

non-felony marijuana convictions that are older than two years;

juvenile records; and

diversions and deferrals.

Although complying with California law can be challenging, employers that hire in the cities of Los Angeles and San Francisco must also look to the ban-the-box ordinances in these jurisdictions, which exceed the requirements found in the FCRA and the California ban-the-box law.

The Los Angeles Fair Chance Initiative for Hiring Ordinance

The Los Angeles ordinance, effective January 22, 2017, applies to any “employer” located or doing business in the City of Los Angeles and employs 10 or more employees. An employee is any person who performs at least two hours of work on average each week in the City of Los Angeles and who is covered by California’s minimum wage law. The ordinance also applies to job placement and referral agencies and is broad enough to cover other types of work, including temporary and seasonal workers and independent contractors.

The L.A. ordinance goes beyond California-imposed requirements by imposing the following onerous steps on employers when considering criminal history (regardless of the source):

Perform a written assessment that “effectively links the specific aspects of the Applicant’s Criminal History with risks inherent in the duties of the Employment position sought by the Applicant.” The assessment form that contains the relevant factors can be found on the city’s website.

Provide the applicant a “Fair Chance Process”—giving the applicant an opportunity to provide information or documentation the employer should consider before making a final decision, including evidence that the criminal record is inaccurate, or evidence of rehabilitation or other mitigating factors. As part of this process, the employer must include with the pre-adverse action notice a copy of the written assessment and any other information supporting the employer’s proposed adverse action.

Wait at least five business days to take adverse action or fill the position. If the applicant provides additional information or documentation, the employer must consider the new information and perform a written reassessment, which is at the bottom of the form mentioned above. If the employer still decides to take adverse action against the applicant, the employer must notify the candidate and attach a copy of the reassessment with the adverse action notice.

Los Angeles also states that all solicitations and advertisements for Los Angeles opportunities must state that the employer will consider qualified candidates with criminal histories in a manner consistent with the law.

Moreover, employers must post, in a conspicuous workplace that applicants visit, a notice that informs candidates of the Los Angeles ordinance. Copies of the notice must be sent to each labor union or representative of workers that has a collective bargaining agreement or other agreement applicable to employees in Los Angeles. This notice can be found on the City’s website.

San Francisco’s Fair Chance Ordinance

San Francisco, as of August 13, 2014, became California’s first city to enact a ban-the-box law. Because the new California ban-the-box law provided greater protections to job applicants, the City and County of San Francisco Board of Supervisors (on April 3, 2018) amended the Fair Chance Ordinance (Article 49) to align (in some respects) with the California law. However, employers with five or more employees working in San Francisco that intend to inquire about and consider criminal history (regardless of the source) also must:

Provide the applicant or employee with a copy of the Office of Labor Standards Enforcement’s (“OLSE”) Fair Chance Act Notice before inquiring about criminal history or ordering a criminal history background check.

Post the OLSE Notice “in a conspicuous place at every workplace, job site, or other location in San Francisco under the Employer’s control frequently visited by their employees or applicants,” and “send a copy of this notice to each labor union or representative of workers with which they have a collective bargaining agreement or other agreement or understanding, that is applicable to employees in San Francisco.” The posted Notice must be in English, Spanish, Chinese, and any language spoken by at least 5% of the employees at the workplace, job site, or other location at which it is posted. The Notice currently is on the OLSE’s website.

Covered San Francisco employers are barred from considering the following types of criminal records (even though these records are not off-limits in other California cities), subject to narrow exceptions: (i) infractions; (ii) convictions that are older than seven years (measured from the date of sentencing); and (iii) any conviction that arises out of conduct that has been decriminalized since the date of the conviction, measured from the date of sentencing (which would include convictions for certain marijuana and cannabis offenses).

California Workplace Solutions

Class actions against employers for failing to follow hyper-technical requirements for background checks have come to dominate the news. Employers in California and elsewhere will want to conduct (privileged) assessments to strengthen their compliance with the myriad laws that regulate use of an individual’s criminal and credit history. Suggested next steps include:

Assess coverage under the California, Los Angeles, and San Francisco ban-the-box laws, and California’s law restricting use of credit reports.

Review job advertisements and postings both for unlawful and mandatory language regarding criminal history.

Train employees who conduct job interviews and make or influence hiring and personnel decisions, regarding inquiries into, and uses of, credit and criminal history, including best practices for documentation and record retention.

Review the hiring process to ensure compliance, including the timing of criminal history background checks, the distribution of mandatory notices, and the application of necessary waiting periods.

As our loyal CalPecs blog readers know, in November 2014, San Francisco passed two ordinances—“Hours and Retention Protections for Formula Retail Employees” and “Fair Scheduling and Treatment of Formula Retail Employees”—colloquially known, together, as the “San Francisco Retail Workers’ Bill of Rights.” (Our most recent update and a recent Management Alert can be found here and here, respectively.) On July 7, 2015, the S.F. Board of Supes proved that the Bill of Rights is a living document by passing an amendment to the SF Workers’ Bill of Rights on the final reading.

Yesterday, we attended a meeting at San Francisco City Hall where the Office of Labor Standards Enforcement (OLSE) gave an overview of the San Francisco Retail Labor Protections ordinances.

As our loyal readers know, we have been writing about the comments and activities surrounding the San Francisco ordinances known as the “Retail Workers’ Bill of Rights” for a few months, with our most recent blog post here and our Management Alert here.

In March 2015, Supervisors Mark Farrell and Eric Mar proposed two amendments to the ordinances. Those proposed amendments would: (1) redefine “Employer” under the ordinances to mean any person or entity that owns or operates a Formula Retail Establishment with 40 or more (rather than 20 or more) Employees in San Francisco; and (2) allow CBAs to include a clear and unambiguous provision where some or all Formula Retail Labor Protections are expressly waived. We anticipate the Board of Supervisors, or a Sub-Committee of the Board, will address these proposed amendments at a meeting in May.

At yesterday’s meeting, the OLSE presented a slide deck reviewing the ordinances, and answered questions from attendees. The OLSE also released a fact sheet regarding the ordinances (available here) and, in the future, potentially may roll out other guidance around the ordinances’ implementation.

In the meantime, the OLSE will be conducting a webinar tomorrow, Wednesday, April 29th, at which the OLSE is anticipated to again take questions under submission. For more information and a link to sign up for the webinar, click here.

Do note that the webinar has limited reservation space. If you are unable to attend or have questions about which to inquire, contact your Seyfarth attorney.

Stay tuned for more information from the OLSE as it is released. We also will be posting information regarding the Formula Retail Labor Protections ordinances up to the July 3, 2015 operative date and thereafter as it becomes available.

As our loyal readers know, we have been writing about the comments and activities surrounding the San Francisco ordinances known as the “Retail Workers’ Bill of Rights” for a few months, with our most recent blog post here and our Management Alert here. As promised, we have our first update to share regarding the implementation of these ordinances.

The San Francisco Office of Labor Standards Enforcement (OLSE) has released a preliminary information page on its website. So far, no new specifics have been provided (stay tuned), but the OLSE has confirmed the operative date for the Retail Workers’ Bill of Rights is July 3, 2015. Therefore, all affected employers must be in compliance with the ordinances by July 3rd, just in time for the long holiday weekend.

Contact your Seyfarth attorney if you have questions about compliance with the ordinances. We can help ensure that the only fireworks you’re apt to encounter are those in celebration of July 4th!

We will continue to provide further updates as new information becomes available.

Many know SFO as the code for the San Francisco airport. But to businesses employing workers in the City by the Bay, SFO has come to mean “San Francisco Ordinance.”

In this first of a three-part series on recent action by San Francisco’s labor friendly Board of Supervisors, we review two ordinances (here and here) that together have come to be known as the “Retail Workers’ Bill of Rights.”

Last August, we blogged about the initially proposed version of this legislation. The final version, as amended, was passed on November 25, 2014. Though some troubling provisions (such as giving employees and applicants the right to sue employers for violations) were removed prior to passage, the ordinances still impose burdensome new requirements on Formula Retail Employers.

But wait: I own some martial arts studios. So surely this new law doesn’t apply to me, right?

Well, we hate to be the bearer of bad news, but yes, it absolutely could affect your business.

The ordinances cover employers with 20 or more employees in San Francisco who operate “Formula Retail Establishments.” These are businesses that engage in retail sales or services regulated as “Formula Retail Uses” under the San Francisco Planning Code, with one change: the ordinances apply only to establishments with at least 20 retail sales locations worldwide (the Planning Code definition requires fewer locations).

A “Formula Retail Use” is one that is, basically, standardized in terms of two or more of the following indicators: array of merchandise, façade, décor and color scheme, uniforms, signage, and trademark or service mark.

As outlined in greater detail here, the foregoing definition includes businesses that some may not consider to be “retail,” such as bars, health spas, dry cleaners, massage parlors, movie theatres, banks, credit unions, art studios, pet grooming establishments, and, yes, even martial arts studios. The Planning Code specifically identifies each such entity as a type of businesses considered to be engaging in “Formula Retail Use.”

We previously blogged about pending legislation in San Francisco titled the “Retail Workers Bill of Rights,” a comprehensive set of policies introduced as two separate pieces of legislation (here and here) by San Francisco Supervisors Eric Mar and David Chiu.

We learned that the Board of Supervisors tentatively—and unanimously—passed both pieces of proposed legislation this week. A confirmation vote is scheduled to occur on November 25, 2014, and, if the legislation passes at that time, the ordinances will become law in San Francisco 180 days after the effective date.

While amendments might be considered prior to the final confirmation vote, we summarize the notable aspects of the two pieces of legislation here, in anticipation of that vote. Of particular note to employers, the legislation provides a private right of action. Any person aggrieved by a violation of the ordinance, any entity a member of which is aggrieved by a violation, or any other person or entity acting on behalf of the public, may bring a civil action in court against an employer for violating the ordinance.

This proposed ordinance would apply to Formula Retail employers with 20 or more employees in the City. “Formula Retail” establishments are defined for purposes of the new legislation as businesses with at least 20 retail sales establishments located worldwide.

About

Published by Seyfarth Shaw LLP, this blog is for in-house attorneys, HR professionals, business owners, and managers who face real issues on a daily basis and need practical solutions to address them. We aim to provide timely, topical information on the challenges that California employers face. Unlike blogs that simply provide legal updates, this blog will have a running series of Workplace Solutions that will address evolving areas of interest, including California leaves of absence, recruiting and hiring, trade secrets, and the use of social media.